Newt Gingrich wants to extend the payroll tax cut – but he wants it paid for by “cutting out government waste.”

Asked by CNBC host Larry Kudlow why he favored extending a temporary tax cut, Gingrich said, “Psychologically, middle class America is going out here ‘okay, you don’t want to repeal the Bush tax cuts, you want to keep all those tax cuts, you say don’t let them go back up. But now we’re going to let taxes go back up on every working American?’ I don’t think psychologically you can make that case.”

Ron Paul’s new ad targeting Gingrich drew this reaction: “He’s got to make up a lot of lost ground. He’s going to say something.” Gingrich went on to defend his conservative bona fides, citing various examples, including his work balancing the budget and reforming welfare.

Speaking about his work with Freddie Mac, Gingrich declined to say he regretted it. “The advice I offered Freddie Mac was in fact aimed at how do you help people get into housing,” he said.

“I don’t think government sponsored enterprises are inherently evil,” Gingrich added. “I think these two have been badly run. I favor breaking them up into four or five smaller units each because I think they’re unmanageable at their current size.”